P3 Toolkit

Analytical Tools

P3-VALUE Analytical Tools

Chapter 9 - Financial Feasibility Analysis

While VfM analysis may help a public agency decide the most efficient way to procure a project, additional analysis is necessary to determine if it is financially feasible to procure the project as a P3. Public agencies use financial cash flow models similar to those in the PSC and Shadow Bid models to help determine the potential costs of a P3. An assessment of projected bid prices and financial cash flows under different procurement models may inform an agency's final determination as to when and how best to procure a project.

Financial feasibility analysis may include a cash flow analysis to assess the impact of each delivery option on the agency's budgeted cash flows, rather than on a net present basis. Models developed for financial feasibility analysis can also help public agencies determine:

How best to structure debt to manage project cash flows;

The amount of public subsidy that might be needed to ensure a competitive bidding process; and

The effects of variation in critical variables on financial feasibility indicators such as annual debt service coverage ratio.

The Financial Assessment Tool provides a simple project viability evaluation that allows users to calculate the level of funding required to deliver a project and the financing costs associated with providing funding.